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Abstract for:

What are the Price Effects of Trade? Evidence from the US and Implications for Quantitative Trade Models

Xavier  Jaravel,  Erick  Sager,  August 2019
Paper No' CEPDP1642: | Full paper (pdf)
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JEL Classification: F10; F13; F14

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
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This paper finds that U.S. consumer prices fell substantially due to increased trade with China. With comprehensive price micro-data and two complementary identification strategies, we estimate that a 1pp increase in import penetration from China causes a 1.91% decline in consumer prices. This price response is driven by declining markups for domestically-produced goods, and is one order of magnitude larger than in standard trade models that abstract from strategic price-setting. The estimates imply that trade with China increased U.S. consumer surplus by about $400,000 per displaced job, and that product categories catering to low-income consumers experienced larger price declines.